Case Study

Case: R & D Electronics Company

(Case adapted from: Heitger, L.E. and Heitger, D.L. (2008)., Issues in Accounting Education, 23(2), 261-272.)

The Automotive Electronic Industry R & D Electronics Company is an established manufacturer and has been designing, manufacturing, and supplying electrical supplies in various forms to the automotive industry. The worldwide market for semiconductors in the automotive electronics industry exceeds $10 billion. In addition, wireless data delivery – currently is estimated to be a $20 billion industry, and experts predict that soon 50 percent of all new cars and 90 percent of higherend models will possess telematic-capable devices. Further, many experts estimate that 30 to 40 percent of the production value of all automobiles consist of electrical products. R & D Electronics historically has invested heavily in researching and developing auto-motive electronic technology in order to provide customers with state-of-the-art functionality, safety, and performance. R&D Electronics continues its heavy investment in this research and development arena because the resulting product features quickly devolve from being “cutting edge” features that create a competitive advantage to commodities that customers regard as standard features on all automobiles. R&D Electronics has continued to upgrade its research and development and manufacturing abilities to keep pace with changing technologies. For instance, R&D Electronics designs, produces, and installs a direct measurement tire pressure sensor and monitoring system for many of its automotive clients. Demand for this system has grown tremendously, as R&D Electronics has gone from producing 3,000 tire pressure sensor devices per week to 250,000 per week. R&D Electronics has found such growth challenging to manage from both cost control and cost forecasting perspectives. Other uses for electronics and microelectromechanical systems include “smart airbags” carbon monoxide sensors, angular...